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Swathmore Clothing Corporation grants its customers 30 days' credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2020, accounts receivable were $592,000 and the allowance account had a credit balance of $56,000. Accounts receivable activity for 2021 was as follows: Beginning balance Credit sales 24 592,000 2,710,000 (2,573,000) (48,000) Collections Write-offs Ending balance 681,000 The company's controller prepared the following aging summary of year-end accounts receivable: Summary Age Group 0-60 days 61-90 days 91-120 days Over 120 days Amount Percent Uncollectible $415,000 98,000 58,000 110,000 4 % 28 39 Total $681,000 Required: 1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. 2. Prepare the necessary year-end adjusting entry for bad debt expense. 3-a. What is total bad debt expense for 2021? 3-b. How would accounts receivable appear in the 2021 balance sheet?

Swathmore Clothing Corporation grants its customers 30 days' credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2020, accounts receivable were $592,000 and the allowance account had a credit balance of $56,000. Accounts receivable activity for 2021 was as follows: Beginning balance Credit sales 24 592,000 2,710,000 (2,573,000) (48,000) Collections Write-offs Ending balance 681,000 The company's controller prepared the following aging summary of year-end accounts receivable: Summary Age Group 0-60 days 61-90 days 91-120 days Over 120 days Amount Percent Uncollectible $415,000 98,000 58,000 110,000 4 % 28 39 Total $681,000 Required: 1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. 2. Prepare the necessary year-end adjusting entry for bad debt expense. 3-a. What is total bad debt expense for 2021? 3-b. How would accounts receivable appear in the 2021 balance sheet?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter6: Business Expenses
Section: Chapter Questions
Problem 43P
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Swathmore Clothing Corporation grants its customers 30 days' credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2020, accounts receivable were $592,000 and the allowance account had a credit balance of $56,000. Accounts receivable activity for 2021 was as follows: Beginning balance Credit sales Collections $ 592,000 2,710,000 (2,573,000) (48,000) Write-offs Ending balance 681,000 The company's controller prepared the following aging summary of year-end accounts receivable: Summary Age Group 0-60 days 61-90 days 91-120 days Over 120 days Amount Percent Uncollectible $415,000 98,000 58,000 110,000 4 % 12 28 39 Total $681,000 Required: 1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. 2. Prepare the necessary year-end adjusting entry for bad debt expense. 3-a. What is total bad debt expense for 2021? 3-b. How would accounts receivable appear in the 2021 balance sheet?
Transcribed Image Text:Swathmore Clothing Corporation grants its customers 30 days' credit. The company uses the allowance method for its uncollectible accounts receivable. During the year, a monthly bad debt accrual is made by multiplying 2% times the amount of credit sales for the month. At the fiscal year-end of December 31, an aging of accounts receivable schedule is prepared and the allowance for uncollectible accounts is adjusted accordingly. At the end of 2020, accounts receivable were $592,000 and the allowance account had a credit balance of $56,000. Accounts receivable activity for 2021 was as follows: Beginning balance Credit sales Collections $ 592,000 2,710,000 (2,573,000) (48,000) Write-offs Ending balance 681,000 The company's controller prepared the following aging summary of year-end accounts receivable: Summary Age Group 0-60 days 61-90 days 91-120 days Over 120 days Amount Percent Uncollectible $415,000 98,000 58,000 110,000 4 % 12 28 39 Total $681,000 Required: 1. Prepare a summary journal entry to record the monthly bad debt accrual and the write-offs during the year. 2. Prepare the necessary year-end adjusting entry for bad debt expense. 3-a. What is total bad debt expense for 2021? 3-b. How would accounts receivable appear in the 2021 balance sheet?
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